Projo Cars Blog

Backseat Driver: Low fuel prices bring limited relief

Now gas prices have really fallen, will there be an increase in demand for bigger vehicles?

I don't think so because the average consumer is currently in a total non-spending mode for anything, let along a vehicle. Indeed, I suspect that those folks buying vehicles right now pretty much have to buy them because their old cars or trucks need replacing.

And it is not hard to imagine fuel economy being in the front of most people's minds even if the price of gas is now below $2 a gallon.

The certainty that comes with a lack of change has been replaced by the wariness that comes from too much change.

Nothing is certain any more. The markets continue to roil, the ranks of the unemployed continue to swell and our retirement savings continue to dwindle.

And while we may be glad that we are now spending less on our fuel bills, we cannot be glad that the reason for the low prices is that the world economy - and thus demand for oil - has fallen off a cliff.

- Peter C.T. Elsworth

Backseat Driver: The Big Three and the future

Should the Big Three U.S. automakers be given a bailout from the government or should they be allowed to go bankrupt?

This debate has been consuming Washington as the chairmen of General Motors, Ford and Chrysler appealed to lawmakers for a bailout. They argued they are losing money hand over fist in the current economic downturn and could be forced into bankruptcy.

Democrats agreed and have put together proposals to keep them afloat.

However, Republicans blocked any immediate aid, arguing the companies were largely the agents of their own demise by not adapting fast enough to a changing market - partly because they continued to produce profitable but gas-guzzling SUVs well into the 21st century.

Like school children sent home to have another go at their homework, the chairmen were dismissed and told to come back when they have worked how they plan to use the bailout money.

But not before they were scolded for flying into Washington in their corporate jets!

But calling this is a crapshoot.

On the one hand, the auto companies and their unusual allies, the Democrats, may be right in fearing a market backlash from allowing the companies to go bankrupt. The effects may not be immediate, but over the long term would certainly involve more shutdowns and layoffs.

On the other hand, would a bailout be just a waste of public money? As The New York Times pointed out last week, the British auto industry was bailed out to the tune of billions of dollars in the 1970s and 1980s before finally going belly up. Could that be a model for the U.S. auto industry?

Hard-nosed Republicans, who are usually allies of big business, see bankruptcy as the only way the auto companies can properly reorganize and become viable.

The question remains whether they can be persuaded that, in the short term at least, the stability of the nation's (let alone world's) very shaky economy might be better served by keeping these companies afloat and their employees working.

- Peter C.T. Elsworth

GM to announce more production cuts - AP

DETROIT -- General Motors Corp. is telling workers that it will make further production cuts at several factories, according to people briefed on the discussions, according to The Associated Press.

The people did not want to be identified because the announcements were still being made Friday morning. The extent of the cuts was unknown.

GM has announced thousands of factory layoffs so far this year and is cutting its salaried staff in order to pare expenses and conserve cash. The company has said it could run out of cash by the end of this year.

GM and its Detroit counterparts are seeking billions of dollars in loans from the federal government. Congress is requiring the automakers to come up with plans to become viable before it will decide on the loans.

Congress wants business plan from automakers

WASHINGTON -- Congressional officials say Democratic leaders have decided to put off a bailout vote for the auto industry until December and will insist that the Big 3 first come up with a plan showing how the money would help transform their industry, according to The Associated Press.

An announcement is expected later in the day in the Capitol, where top Democrats in the House and Senate have been meeting. The officials who described the developments did so on condition of anonymity, saying they were not authorized to disclose them.

The big auto companies - General Motors Corp., Ford Motor Co. and Chrysler LLC - have been seeking government loans totaling $25 billion to stay in business until spring. Critics want to make sure the companies will use the money to transform their industry into one that is more competitive.

Waxman topples Dingell for key panel chair

WASHINGTON -- Rep. Henry Waxman - a liberal ally of Speaker Nancy Pelosi - will take over the chairmanship of the powerful House Energy and Commerce Committee when the next Congress convenes in January, according to The Associated Press.

Waxman is a liberal California Democrat. In an election among House Democrats, he toppled veteran Michigan Rep. John Dingell from the post. Dingell is the longest-serving member of the House.

Waxman won the panel chair by a 137-122 vote, capping a bitter fight within the Democratic Party caucus on the Hill.

Dingell has been the top Democrat on the panel for 28 years and is an old-school supporter of the auto industry. Waxman has complained that the committee has been too slow to address environmental issues like global warming

Oil hits 3-year lows; gas less than $2 half of US

COLUMBUS, Ohio - Oil prices have hit levels not seen in more than three years and retail gasoline prices are below $2 in nearly half of the country, according to The Associated Press.

Oil prices Thursday fell as low as $49.75 a barrel, levels last seen on May 18, 2005, when oil was at $46.80 a barrel.

Light, sweet crude for December delivery is still down $2.64, nearly 5 percent at $50.98 a barrel on the New York Mercantile Exchange.

Meanwhile, prices at the pump fell again overnight to nearly $2 a gallon and are now down more than 50 percent in just four months when they reached a record $4.11 in July.

GMAC files for bank holding status

DENVER -- GMAC Financial Services has applied to become a bank holding company, which would allow General Motors' financing arm to be eligible for aid under the government's $700 billion bank rescue plan, according to The Associated Press.

GMAC said Thursday the change in status would shore up its capital position and allow it to continue providing automotive and mortgage financing.

Detroit automakers' rescue stalls in Senate

WASHINGTON -- A plan to give troubled U.S. automakers billions of dollars in government-backed loans is on life support, leaving the fate of hundreds of thousands of workers and Detroit's once-venerable car companies hanging in the balance, according to The Associated Press.

Senate Majority Leader Harry Reid, D-Nev., canceled plans Wednesday for a vote on a bill to carve $25 billion in new auto industry loans out of the $700 billion Wall Street rescue fund. The Bush administration and congressional Republicans have rejected the Democrats' plan to dip into that pot of money.

Warning of economic disaster, a bipartisan group of senators from auto industry states are trying to reach a deal on an alternative package. Even if an agreement can be reached, Reid signaled Thursday that the Senate would likely not be able to consider the bill until after Thanksgiving.

Oil falls below $50 a barrel

LONDON - Oil plunged below $50 a barrel on Thursday, deepening losses over the previous four sessions as battered financial markets reflected ever lower confidence in the world economy and evidence mounted of falling fuel demand, according to Reuters.

U.S. crude fell $3.71, to $49.91 a barrel by 9:02 a.m. EST, the weakest level since January 2007.

Democrats seek lower expectations for auto bailout

WASHINGTON -- Top Senate Democrats suggested Wednesday that a bill to rescue Detroit's Big Three automakers was stalled and challenged the Bush administration to take steps to save the industry if congressional efforts falter, according to The Associated Press.

The White House quickly rebuffed the suggestion.

Senate Majority Leader Harry Reid of Nevada sought to lower expectations of reaching a deal on the $25 billion proposal before Congress quits for the year.

Oil prices fall below $55 a barrel with global stock markets

SIOUX FALLS, S.D. -- Oil slipped below $54 a barrel Wednesday as stock markets across the globe fell and yet another U.S. government report showed how badly the housing market has been hit, according to The Associated Press.

Governments, businesses and consumers cut back on energy use when the economy slows and crude prices reflected those perceptions.

Light, sweet crude for January delivery traded down 66 cents at $54.10 a barrel on the New York Mercantile Exchange after falling to a 52-week low of $53.66.

Ghosn says auto industry consolidation likely

LOS ANGELES -- Nissan Motor Co. and Renault SA Chief Executive Carlos Ghosn said Wednesday that he expects the current crisis in the auto industry will soon lead some carmakers to consolidate, according to The Associated Press.

Ghosn made his remarks at the Los Angeles Auto Show while the chief executives of General Motors Corp., Ford Motor Co. and Chrysler LLC were in Washington making their case to the House Financial Services Committee for $25 billion in loans to stay in business.

Ghosn said the weakening global auto market that the auto industry is facing will knock out some competitors. He pointed to the U.S. financial industry, which has seen key players recently disappear.

A British Lesson on Auto Bailouts

PARIS -- A faltering auto giant whose brands are synonymous with the open road. Hundreds of thousands of unionized workers with powerful political backers. An urgent plea for the government to write a virtual blank check.

This is not the story of Ford and General Motors, but British Leyland, a car company that went through £11 billion of inflation-adjusted British taxpayer money, or $16.5 billion, in the '70s and '80s before going out of business, according to The New York Times.

All that is left of the company now are memories of cars like the Triumph, and a painful lesson in the limited effectiveness of bailouts.

A Bridge Loan? U.S. Should Guide G.M. in a Chapter 11

Tony Cervone, a spokesman for General Motors, has a warm and friendly way to summarize his ailing company's ongoing dance with disaster, writes Andrew Ross Sorkin in The New York Times.

"The fact is we're looking at a short-term liquidity crisis that needs a bridge loan," Mr. Cervone said this weekend to The Detroit Free Press.

To him, G.M. is merely in a temporary bind. If the government -- that is, taxpayers -- were just willing to spot G.M. some cash to get it over this little rough patch, everything would be just fine.

Mr. Cervone's comment reflects what's wrong with the mind-set in Detroit.

G.M is using money so quickly that a $10 billion infusion made today would disappear by February. That is why taxpayers shouldn't fork over a cent, at least until shareholders are wiped out, management is tossed out and the industry is completely reorganized.

But there is a fix. Call it a government-sponsored bankruptcy, a G.S.B., if you will. It might sound a bit like an oxymoron, but it is an idea that has been quietly making the rounds in Washington. It makes a lot of sense.

Clout Has Plunged for Automakers and Union, Too

DETROIT -- When the leaders of the three Detroit auto companies and the United Automobile Workers union travel to Washington to make their case for a federal bailout, they will be flying into stiff headwinds of public opinion, according to The New York Times.

Thus far, much of the commentary in Washington, in the pages of major newspapers and on the Web, has been against providing financial support for the companies, which they will say they desperately need in hearings beginning on Tuesday.